Two more ways to do a zero-down acquisition

There are tons of ways to buy cash-flowing small businesses without having to pay much (or any) money up front.

I’ve mentioned a few of them consistently over the course of this newsletter:

• Getting an SBA loan to cover up to 90% of the purchase price

• Bringing on private investors to cover the SBA loan’s 10% down payment in exchange for equity

• And seller financing, where the seller helps pay for some (or all) of the acquisition

But these aren’t the only options you have at your disposal.

Today, I’m going to share two more methods to fund your first acquisition that I haven’t mentioned yet:

Securities-Based Lending (SBL)

This is where you go to the bank and take out a line of credit against your existing investment portfolio.

I.e., securities like stocks, bonds, and shares in a mutual fund or ETF.

If you have a lot of money tucked away into investments ($100k or more), this can be a great way to help pay off the down payment on an SBA loan.

You’ll typically be able to get a securities-based loan for between 50% and 95% of the value of your underlying portfolio.

And the best part is: you don’t have to sell your assets — you’re just pledging them as collateral, which means they can keep growing in value over time.

However, some lenders will require immediate payback of part of the loan if your portfolio dips below a certain value. So be aware of that risk.

For more info on how to do this, Google SBLOC (Securities Backed Line of Credit) and/or PAL (Pledged Asset Line).

Consulting for equity

This is one of my favorites:

• Find a local boring business

• Offer to provide knowledge and expertise to help them grow

• In exchange, you get a piece of equity

Most people only do this after they’ve done multiple deals, and have proven they know how to help companies scale.

Despite that, this is exactly how I structured my very first acquisition (with no SBA loan).

I originally wanted to get into a fitness franchise, and met a guy who owned one.

But as it turns out, he also had a small SaaS startup and needed help building out the team and raising money from investors.

I’d been doing both for years already at JP Morgan.

So I came on board as a partner, pitched in $5k for a minority stake, and helped him scale the annual recurring revenue 10X over the next 12 months (from $150k to $1.5M).

The rest is history... and that company is still part of my portfolio today!

Point being:

If you have specialized knowledge that could help grow the company in some way, this could still be a viable option for your first deal.

Thinking of buying your first business, and want me to send you qualified deals that match your budget?

Let me know here, and I’ll be in touch.

Or if you’re looking to sell a business:

Tell me more here, and I’ll send you qualified buyers if there’s a good match.

Have a great weekend, and I’ll see you in Tuesday’s issue!

— Ben Kelly